Date: 18-07-2014 Platform/Print Media: HBL Source
MyCFO CO-Founder talks of outsourced CFO services gaining ground in India Inc
For mid-cap companies, family-run firms and PE-invested entities that cannot afford to hire a qualified and experienced chief financial officer, there could be some relief at hand. In the past three years, a few companies have emerged in the Indian corporate landscape offering full-fledged CFO services at costs that are 30-40 per cent lower than what one would have to pay for a full-fledged professional.
“This trend is increasing as there is still a huge gap between demand for and supply of experienced CFOs,” says S Venkat, co-founder of MyCFO, India’s first and largest CFO services provider.
In an interview with Business Line, Venkat speaks on how this trend emerged in India and the potential and challenges ahead. Edited excerpts:
How has this trend evolved in India?
It started some three to four years ago. Downturn or no downturn, every business entity, be it a family-run one or those wanting to scale up, require an experienced CFO. But the gap between demand for and supply of CFOs is huge, and there is the question of affordability. Today, to hire an experienced CFO from a large corporate, you need to pay a salary of ₹50-60 lakh a year. Small or mid-cap companies mostly had to operate with a controller, who would do basic financial operations such as accounting, auditing, traditional compliance and tax. These functions actually comprise only 30 per cent of the tasks of a CFO. The other functions range from inventory management and fund-raising to strategy development, business process improvement, IT implementation and performance measurement.
What kind of demand-supply gap exists in availability of CFOs?
If you take the number of ₹100-crore-plus turnover companies in India today at 65,000, the number of listed companies that employ full-time CFOs is estimated at about 9,000 and large unlisted companies having such personnel at 6,000. There are still about 50,000 entities that need good quality CFOs.
Typically, which companies look for outsourced CFOs?
These would range from recently acquired Indian JVs or subsidiaries of overseas corporations to technocrat promoters, PE investors or PE-invested companies and traditional family managed businesses. There are some three or four companies like ours providing CFO services, but we were the first in India and are the largest. We started off with 10 clients in our first year of operation, which increased to 25 in the second year. Today, we have 100 clients, a quarter of which are PE invested.
What is your revenue model?
Typically, we charge about 60-70 per cent of what an experienced CFO would demand as salary. The remaining is performance-linked, be it in terms of increase in profit or cost savings.
Do you offer virtual CFO services?
No. I think the virtual CFO concept will take some more time to find acceptance in corporate India. Today, we have a team of 100 professionals and, depending on the need, we depute one to 15 of our members to our clients. They all work on-site, meaning from the offices of our clients. Indian businesses are still not warm to the idea of a remote CFO. Companies should develop trust in an outsider CFO, as he has to have access to all company information. For this, he has to become part of the company, though for a limited period.
What are your plans for expansion?
We are looking to scale up operations. Besides, we are thinking of coming out with standardised CFO packages with limited tasks for smaller companies. We are also planning a training institute to make controllers full-fledged CFOs.